Price of Gold Fundamental Daily Forecast – Rally Appears to Be Stalling as Congress Nears Relief Package Deal

James Hyerczyk
2 min read
0

Gold futures are trading slightly higher on Tuesday, but rangebound after hitting a two-week high earlier in the session. The one week rally appears to be stalling after a test of a key technical zone on the charts. Gains are likely being capped by a firm U.S. Dollar Index, but underpinned by investor hopes for additional fiscal stimulus to help the economy combat the current surge in coronavirus cases.

At 12:57 GMT, February Comex gold futures are trading $1868.50, up $2.50 or +0.13%.

The pattern that gold has been following since last week appears to be stalling. Last week, gold bottomed as headlines reported the start of stimulus talks and now seems to be pausing as reports indicate the U.S. Congress may be close to reaching a deal on the new package. This gives the move the appearance of a “buy the rumor, sell the fact” situation.

The U.S. Congress is expected to vote this week on a one-week stopgap funding bill to provide more time to reach a deal on COVID-19 relief as imposition of stricter lockdowns to control surging infections highlighted the need for more stimulus.

U.S. Senate Democratic leader Chuck Schumer said there were signs of progress in talks on a bipartisan bill.

Daily Forecast

Despite the week-long rally and the retest of levels not seen since November 23, gold is still in a short-term down trend. The move we’re currently seeing is short-covering and some aggressive bottom-picking following the more than $90 break two weeks ago.

Optimism over the successful launch of the coronavirus vaccines is helping to keep a lid on prices. Furthermore, the current fiscal stimulus package being discussed is relatively small, while falling below market expectations. This isn’t enough, in my opinion, to fuel the start of a major rally.

Don’t get me wrong, there is a need for stimulus at this time as California on Monday imposed a raft of new COVID-19 restrictions, while New York weighed a ban on indoor dining as nationwide cases continue to soar. This points toward more problems with the economy during the first quarter, and probably the need for additional government relief shortly after President-elect Joe Biden takes office on January 20.

I have to conclude that we could be looking at a rangebound trade albeit a wide range while traders monitor the start of the coronavirus vaccines in the U.S., their potential side effects and its immediate effect on the economy.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

More From FXEMPIRE:

Advertisement

Recommended Stories